Southeast Asia’s (SEA) power sector has traditionally relied on fossil fuels. According to the International Energy Agency (IEA), electricity demand is set to grow rapidly in the coming decades in SEA and an increasing share will be met by variable renewable sources. The region has ambitious renewable energy goals which, when leveraged with its huge untapped potential renewable sources, can provide local and affordable alternatives to fossil fuels. The region aims to raise the share of renewable energy to 35 per cent share of installed capacity by 2025. The region is also scaling investments in grid infrastructure and focusing on regional integration. Besides these, there are opportunities in areas like decarbonisation initiatives, e-mobility, energy efficiency and energy storage.
Size and growth
Generation
With economic growth, energy demand in the region is growing rapidly. To meet this demand, the region’s installed power capacity has increased from 239.38 GW in 2016 to 289.95 GW in 2021, recording a compound annual growth rate (CAGR) of 3.9 per cent. Indonesia and Vietnam have the largest share (24 per cent each) in installed power capacity amongst all SEA countries, followed by Thailand (18 per cent), Malaysia (12 per cent), the Philippines (10 per cent), Singapore and Lao PDR (4 per cent each), and Myanmar (3 per cent); the remaining is accounted for by Brunei Darussalam and Timor Leste. SEA is a renewable energy-rich region with a solar potential of over 41 TW and wind potential of 1.8 TW. However, despite the large potential of renewable energy, uptake has been limited. In 2021, SEA’s total installed capacity of renewable energy stood at 92.9 GW, having increased at a CAGR of 8.9 per cent from 60.6 GW in 2016. Significantly, Vietnam’s installed renewable energy capacity accounts for 41 per cent share of the total installed capacity in the region, having increased at a CAGR of 17 per cent over the last five years.
Vietnam, Thailand, Indonesia and Malaysia contribute to 76 per cent of SEA’s total renewable capacity, while Brunei Darussalam and Timor Leste have low renewable capacities, with no significant additions over the last five years. The SEA region has large gas and coal reserves which makes them an affordable option for power generation. Hence, in terms of fuel mix, fossil fuel-based plants comprising coal, gas and oil have the highest share (67 per cent) in installed power generation capacity. This is followed by hydropower that contributes to 17 per cent of the total installed capacity. Nuclear power has seen an uptake only recently and thus has been absent from the fuel mix. Electricity generation in the region has increased from 936 BUs in 2016 to 1,140 BUs in 2021, increasing at a CAGR of 4 per cent. In terms of growth rates, Cambodia and Lao PDR recorded the highest CAGR in electricity generation of over 9 per cent between 2016 and 2021.
Transmission and distribution
Among SEA countries, Indonesia has the largest transmission network with a line length spanning 58,826 circuit km and transformer capacity of 153,565 MVA as of December 2021. Malaysia and Thailand are next with extensive transmission infrastructure, while Cambodia and Brunei Darussalam are at the lower end of the spectrum. Increasing electricity demand and growing electrification rates in SEA require augmentation of distribution infrastructure to ensure quality power supply to consumers. Electricity consumption has increased to reach over 1,054 BUs in 2021 from 862 BUs in 2016 at a CAGR of 4.1 per cent. Indonesia, Thailand and Vietnam accounted for nearly 68 per cent of the total electricity consumption in the region. Distribution losses in the SEA region have varied over the last six years at between 0.08 BUs and 26 BUs. In absolute terms, Indonesia and Vietnam recorded the highest losses at 25.26 BUs and 15.69 BUs respectively during 2020.
Key trends and developments
Energy access: Energy access has been improving in SEA countries with around 95 per cent of households today having electricity. However, access to electricity in Myanmar remained very low at 70 per cent during 2020. The recent surge in commodity prices threatens to set back progress. ASEAN Power Grid (APG): Since the establishment of electricity interconnection arrangements through the APG, ASEAN has already built cross-border interconnections with a transfer capacity of 7,720 MW. Around 32.8 GWh of electricity was traded between Laos and Malaysia through Thailand under the Lao-Thailand-Malaysia Power Integration Project (LTM-PIP) during 2018- 21. The successful commencement of the Lao PDR-Thailand-Malaysia-Singapore Power Integration Project (LTMS-PIP) in June 2022 using existing interconnections marked a historic milestone in the region as it is the first multilateral cross-border electricity trade involving four countries.
Australia-Asia Power Link: The Australia-Asia Power Link is a proposed electricity infrastructure project that will deliver power generated from the world’s biggest solar farm in Australia to Singapore through overhead and undersea cables. Renewable electricity will be generated by a 17-20 GWp solar farm with approximately 36-42 GWh battery energy storage located near Elliott, Northern Territory, Australia. The electricity generated at the solar/storage facility will be transmitted 800 km overhead to Darwin and then via a 4,200 km undersea high voltage direct current (HVDC) transmission network to Singapore. It is expected to begin supply of electricity to Darwin in 2026 and to Singapore in 2027, reaching full capacity in 2028.
Technological advancements:
Coal-based thermal power plants are adopting ultra-supercritical technology to generate electricity in the most efficient way with minimum pollution to the environment. To curtail sulphur oxide and nitrogen oxide emissions, various technologies such as flue gas desulphurisation and wet scrubbers are being adopted. Larger plants have deployed digitalisation and automation for operations and maintenance. In the transmission segment, Singapore plans to build SEA’s first large-scale underground substation in a move to optimise space. Further, with an increase in demand for electricity, coupled with an increase in the electrification rate, the number of HVDC projects is expected to increase in the region. The next phase of digital transformation through smart grids and advanced metering infrastructure is also under way.
Net zero commitments:
Following the Paris Agreement, the SEA countries revised their power development plans to include commitments to power sector decarbonisation. The region has agreed collectively to increase the share of renewable energy in installed power capacity to 35 per cent by 2025. At the COP26 in 2021, most ASEAN member states reaffirmed this commitment, and currently, nine out of 10 governments have pledged to achieve net zero targets by 2050. Electric vehicles (EVs): EVs are a key player in decarbonising the transportation sector. The EV market in the ASEAN region recorded a value of $498.93 million in 2021, and is expected to reach $2,665.3 million in 2027. Most ASEAN countries are setting up a national EV policy to accelerate EV adoption with the involvement of charging operators, energy companies, EV equipment companies, start-ups, and automotive companies.
Issues and outlook
Most of SEA’s power generation is through fossil fuels. A large number of the coal-powered plants in the region are among the youngest in the word. It is, therefore surprising that an increasing number of countries in the region have targeted achieving net zero emission by the middle of the century. Further, domestic reserves of fossil fuels in the region are declining, which implies that SEA may become a net importer of fossil fuels in the next few years. The increase in the prices of natural gas in 2021, which has been accentuated by the invasion of Ukraine, may alter perceptions regarding the affordability of natural gas as well as policies towards investment in gas import infrastructure. Currently, ASEAN does not have an integrated electricity market. An integrated ASEAN power grid is expected to bring about significant benefits such as reduced cost and the ability to pool various renewable sources from countries with endowment advantages and supply to countries with significantly less resources. In addition, regional integration and multilateral power trading can also help increase power system flexibility in SEA.
According to the International Renewable Energy Agency (IRENA), large investments are needed across the entire energy system in ASEAN, from supply to infrastructure to the end-use sectors. Significant annual investment of about $200 billion to $245 billion will need to be directed into renewables, energy efficiency and enabling technologies, and infrastructure over the period to 2050. In cumulative terms, an investment of about $6.3 trillion to $7.3 trillion will be required. In the nearer term to 2030, and solar PV installed capacity will need to reach 240 GW across the region, requiring an investment of $150 billion within this decade. Grid investment will require nearly $200 billion, including national and international transmission expansion.
Significant additional investment is needed in key enabling technologies such as EVs and charging stations, biofuel supply, and energy efficiency, going forward. SEA faces the twin challenges of increasing total investment in the energy sector while increasing the share of investment going to clean energy technologies. Improving regulatory and financing frameworks could help SEA reduce the costs of clean energy projects.
